What Everyone Gets Wrong About Global Debt | Economics Explained

[@Dantee.15]

Economics is the one college major that shows you how fake everything from actually being in college to the entire financial system. Being an economics major in post 2020 is mind blowing because you really are on the cusp of everyhting economists have been studying for decades

[@InnuendoXP]

Economy is just one expression of just how immensely powerful systems of belief are. Things have utility and are necessary sure, but that often has little to do with the value abstractions we place on them. Though wars over water might show this up in the coming decades.

[@JohnnyManu40]

@@InnuendoXP Ultimately, economies will exist where there is need for things that cannot be easily obtained on ones own, and are especially needed for the continuation of life for the person at hand. So yeah, water will become an interesting one if not handled properly in the near future. But, that's only if entire nations ignore the potential of using things like desalination plants to both decrease the rise in sea levels, and supply fresh water to coastal farms, instead of having them drain the inland lakes and rivers, etc and so forth. There are plenty of options to fix many of the worlds problems. People just need to stop fighting and listen to those of us who are smarter than them.

[@Mike-fx4nu]

You're always on the cusp of everything people have been studying. THat's the point.

[@InnuendoXP]

@@JohnnyManu40 desalination plants to address rising sea levels?? I think you're underestimating the scale of the problem by many orders of magnitude there. The peril of economics is it has an implicit hubris in only counting or modelling what can be treated as an asset or resource insofar as it's directly valuable to us -- while not counting at all the immensely greater part of the picture that is the entire world of externalities that make sources of resources, assets, and labour, possible to exist in the first place.

[@tellmemoreplease9231]

@@InnuendoXP "desalination plants to address rising sea levels?" I don't think that was the intent. Drinkable water is going to become expensive. Right now the aquifers across the country (the Ogallala Aquifer for example) are being sucked dry. Each year they have to drill deeper to reach water. You know, the deeper you go, you'r sucking up more and more heavy metals to drink and spray on our food crops. Heavy metals are bad for life. No one is watching...... But we have money to spend in Ukraine.

[@RsSooke]

It’s amazing we manage to do and build so many things despite everyone owing something else so much. It’s almost like money exists and doesn’t exist at the same time.

[@jacobjones630]

Money is the material relation between people and the social relation between things.

[@impossiblejonathan9650]

I personally would say that money itself is debt. The value money has is equal to a certain amount of goods and services. Let's say you own 10$. That basically you are owed goods and services worth 10$. You can then go to a shop and buy some bread, butter and apples and then the balance is equal once again. Just my personal view though.

[@jonrolfson1686]

All that is needed is faith and trust, and a little bit of pixie-dust.

[@impossiblejonathan9650]

@@jonrolfson1686 And between these three there is none that money could buy 🤬

[@Mike-fx4nu]

No, it's almost like we're robbing the future human beings in perpetuity. Oh wait, not almost. That's what's happening.

[@the_phobia]

Thanks for making this. Being in prime house buying and family starting age in Canada, I have lots of conversations with my peers about the long term implications of poor policy decisions our government makes, including artificially supporting our real estate bubble instead of funding investment in and business incentives, and other productive assets.

[@ThwipThwipBoom]

Imagine having a family in 2023. Nerd!

[@NickSprecher]

Great comment. I don’t think people in the US fully understand how Canadian policies have affected the Canadian housing market. The US housing issue seems to pail in comparison to the Canadian housing crisis.

[@catdogmousecheese]

I had an economics teacher in business school who really passionately believed buying a house and investing in real estate was a scam. He said he's always leased his home and will continue to lease till the day he dies.

[@11brandonminer]

As a fellow Canadian our financial policy choices are baffling. Getting a million+ dollar mortgage is easier than a million dollar business loan

[@Tonyx.yt.]

dont worry, liberals are read to increase the bar from 1 million on 2022 to 3 millions immigrant per year in 2030, then maybe with a 200 hours per month low income job peoples in canada would be able to afford a shared bedroom with 10 strangers inside a rat infested basement

[@MikeyyyS]

Inflation is producing a slew of problems throughout the world, including food shortages, diesel and heating fuel shortages, and housing prices and financial market crash. This global collapse might end up being a part of us for a very long time. With inflation currently at about 9%, my primary concern is how to maximize my savings/retirement fund of about $300k which has been sitting duck since forever with zero to no gains.

[@noahway13]

I have zero savings and I'm on disability. So... IDK>

[@stephenpowstinger733]

Inflation at about 9%?

[@WaveRider1989]

You don't open up CDs, bonds or nothing ?

[@CypherJj4457]

He's a bot, don't reply

[@mmabagain]

@@CypherJj4457 Exactly.

[@AlanTheBeast100]

" ... as long as a few things don't wrong." Statistically a few things will go wrong at the same time at some time ... And a thing that goes wrong might not be the expected thing, but some thing that nobody ever expected...

[@TomTomicMic]

We went through two world wars directly in Europe, after the second war Boomers started the best period of development and prosperity, however the current leaders are implementing ideology rather than practicality, so things are going pear shaped, they will be in parts unsustainable, you can't have things that cost more than you can afford!?!

[@AlanTheBeast100]

@@TomTomicMic Unconstrained development demands unlimited resources. That is the fundamental failure: a belief that there are limitless resources while the world population is growing.

[@mannion7646]

ALIENS

[@Jondiceful]

One factor about the debt to GDP ratio not addressed in this episode is that GDP is generally an annual value, while most debts are not meant to be paid in a single year or even a single decade. People don't normally take out a mortgage equal to their yearly salary, and virtually nobody pays their entire mortgage in a year. It might be more informative if we had a way to measure a yearly debt repayments to GDP ratio. Oh and one other thing. Any discussion of debt in the USA is not complete without taking into account Student Loan debt and medical debt.

[@trevinbeattie4888]

He did partially address this by comparing global debt to global net worth, which is its more direct counterpart. I think it might have been helpful to also compare annual _borrowing_ (or for governments, deficit spending which amounts to the same thing) against GDP.

[@abhitiwari5346]

@@mikecollon100 This isn't coming from this video bro. You initiated good but then you went out of orbit.

[@adamjohnson6016]

@@mikecollon100 This sounds like someone living in a bubble of economic understanding, not an unbias understanding.

[@awesomestuff2496]

​@@adamjohnson6016Do you have any valid counter argument against his views?

[@katiecannon8186]

Our government owns the 💵 printing machine. Conflating the way federal finance works with how household finance works is just sillyness Households don’t own the 💵 printing machine Our government can never run out of the ability to print 💵 You gotta work to try to earn 💵 When you take out a bank loan, you’re essentially promising to pay your bank back in government issued 💵 We use government issued 💵 to shop, pay our banks back, pay tax & net save. If we have enough 💵 savings, we can buy a treasury bond and earn interest on our government issued 💵 Government spending funds private sector net savings

[@mvhuber]

Great video, but what I think you missed was QE (Quantitative Easing), or the printing of money. When you accumulate debt, and then never really tighten up, and simply print debt over and over again due to political pressures, what then happens. Obviously you see inflationary pressures that are not the result of productivity, but the result of simply monetary policy.

[@therealcool1144]

or maybe this inflation is the result of a supply shock and the shut down of borders inducing a shock in supply and a bottleneck of demand

[@ObstaclestoOpportunities]

make sense after the pandemic, majority of nations did the same not only USA

[@NickSprecher]

Your channel is a masterclass. Handing out Econ degrees. Well done.

[@argongamer8986]

Definately

[@obviouslymatt6452]

eh i dunno. these guys get a fair bit wrong, i would be cautious of overestimating your knowledge based on these videos

[@Unknown-jt1jo]

@@obviouslymatt6452 Yeah, you can't compare watching KZbin videos to doing real economics. This channel is edutainment.

[@dead-claudia]

⁠@@obviouslymatt6452obviously they aren't perfect, and they admit that in literally every main channel video. also nick to his credit is merely exaggerating to make a point.

[@Unknown-jt1jo]

@@dead-claudia It's not a question of "perfect" or not. Real economics is studied rigorously and mathematically. This channel is fun, but it conveys only basic concepts in highly simplified ways. Which is absolutely fine, as long as you know what you're getting.

[@stephoh8613]

I don't know if this may be the plan for the next video, but it would be great to discuss what happens when debt is not payed back - forgiven or defaulted on. I think the part on who owns the debt at the end is possibly a little short to point the whole picture of the consequences of debt and positive vs negative aspects. There is a growing trend in political debates about loan forgiveness (from the US college debt to government debts) and that changes a lot about the risk/value calculation of debt and the potential impacts of debt on the future. Getting away from economics here, but it would also be an interesting topic to discuss asset value and investment if a time of demographic shifts - so far the world has only known demographic growth; what happens when the world population stagnates or diminishes? Can't turn to immigration on that scale...

[@itcamefromthedeep]

Simone and Malcolm Collins may be the authors you're looking for regarding demographics and finance.

[@stephenpowstinger733]

“…not payed back…” PAID.

[@mohdghani7171]

@@stephenpowstinger733 you got the point,no?

[@stephenpowstinger733]

Yes

[@katiecannon8186]

Conflating government bonds (so called government bonds”debt”) with private debt is just wrong. Our government issues the 💵 we use to buy treasury bonds. Bonds are literally just an interest bearing savings account. Our government pays that interest by printing up some 💵 Our government owns the 💵 printing machine and can never go broke You don’t own the 💵 printing machine so can go broke.

[@Friedrich713]

"When the global economy borrows money, it's not so much borrowing from some other entity as much as it's borrowing money from its future self" feels like an unnecessary complicated way to say, that a national or commercial bank is creating money & debt by extending their excel spreadsheet :D The way our monetary system works, at least the base functionality without its complex implications, is rather simple.

[@therealcool1144]

I went to an economic convention like 15 years ago, the people called MMT said this, nobody believed them but I knew they were correct as I worked in a bank.

[@hauke2996]

I think its not it is just higher the amount of globally available money

[@ObstaclestoOpportunities]

it is complex because it governs 350M people, it can no longer be simple.

[@oblivianji]

these bizarre intonations at the end of many sentences are too good

[@insanittiez4860]

If everyone is owing, who is actually making the money. I feel like at some point, this is going to be a serious problem

[@bahmanrouhani9390]

I'm a huge huge fan of the content you make but I kind of wish this channels videos was a bit more subject oriented rather than having case studies or news/event based videos like they are now. I love this channel and have been a long time subscriber, but since almost all videos are made so that everyone can learn from them, frequent watchers end up going through same concepts with each new video without learning much. As I said, I absolutely love this channel and am a HUGE fan, but it would be nice if you also had a set of videos where you'd go through economic subjects and concepts in depth and detail. Thanks for the awesome videos.

[@pauljohnsonbringbackdislik1469]

12:34 NOT TRUE. You cannot blindly assume value = $$ somebody might be willing to pay for it. - hospitals and public healthcare save lives - public transport infrastructure save lives (reduces noise and pollution in cities) - social welfare programs act to reduce poverty and homelessness (otherwise you get thousands of tents on the streets of LA) - houses are overpriced because of greed and systemic issues The true value of assets is so much different from either price tag or "market value". And what about liquidity. This simplification does more harm than good.

I love the timeline at 8:50 in the video. Especially where 1990 steps in and hides the 2007/8 financial crisis. :)

[@AnonNobody]

I think the lines are accurate to 2008. As 2010 will still show what was on the other side.

[@dimitristripakis7364]

I think the 300 trillion number is artificial, because if A owes $1000 to B, B owes $1000 to C, and C owes $1000 to A, then the "global" debt according to the definition is $3000, while in reality it is zero.

[@ThomasVWorm]

Even when A owes to B, As debt is Bs asset and both adds to zero, because A and B together owe to nobody and Bs asset balances As debt. So the only way the worlds debt is above zero is when we owe something to the Marsians.

[@papaplatte3909]

So happy you are going to talk about debt distribution next week. I was the whole time like yes I understand how debt means more available money because global networth + debts(assets). But I also was the whole time like , okay but somehow it seems that not everybody is benefiting from this more available money. Looking forward to hear your take on this :)

[@ribertfranhanreagen9821]

The most irony of current system is the one that provide real value is the one that benefit less, compared to those that understand the system and play it. Just see who is richer a farmer that contribute to your continuity of living by providing resource for people to eat. Vs a banker that basicly play the economy system

[@ObstaclestoOpportunities]

@@ribertfranhanreagen9821 the banker provides the farmer with capital, a small few farmer could not supply the entire nation with food supply you need scale and the banker allows farms to scale

[@rising_crust]

At 11:41 you said $300 billion instead of $300 trillion and then $700 billion instead of $700 trillion. Love the channel!

[@geoms6263]

billion trillion it's too big a number for the brain to understand anyway.

[@PrimaMapleSyrup]

Please never try to be an economist​@@geoms6263

[@JesusAlfonso-k9f]

this reminds me dr evil

[@mcox565]

Excellent video! I have little training in economics. The video did a great job explaining debt.

[@roberthuntley1090]

I think that this understates the problem. The UK government 'owes' me a pension from the age 66 until I stop breathing, and similarly for the public sector pension I'm currently receiving. The same applies to NHS medical care, means tested social security and so on. I don't believe that these sorts of debt are recorded anywhere.

[@donkeyDangerMouse]

What you are talking about is a specific social case of the UK, where this video is a global perspective. However, social systems are covered under government spending. Most of the world doesn't have social structures like the UK and to produce a video that details the specifics of each country on earth would probably be redundant before it was finished.

[@nicholasdean3467]

I thought I read somewhere that it is impossible to calculate how much debt there is globally since anything you do is on credit multiple times over.

[@blackcountrysmoggie]

That was a good one. Genuinely interesting. Thanks

[@veganchaatparty]

this was a super super superb video....such complex topics simplified and explained so beautifully.....thanks so much for sharing....

[@oopskapootz7276]

GDP only measures the production of goods consumed by families. It doesn’t include corporate or institutional consumptions. It makes little sense to compare GDP with something much more general like the global debt. It’s comparing apples and scalpels. This is making me question the rest of the content from this channel..

[@madelineariah]

This is honestly the best and most concise explanation of how debt works and I hope more people get to see this video. One of the big things that stuck with me during the pandemic is that for a while, the US Treasury was floating the idea of minting a $2 Trillion coin, and everyone was losing their minds over it. But given that the US can and does borrow against assets, and it has a truly limitless supply in the form of both tangible resource allocation AND potential resource creation, it never should have been a point of discussion to begin with. According to USDebtClock, our total US assets is approaching $200 Trillion. Expect that number to skyrocket when AI goes mainstream, when energy storage becomes optimized for renewables, and if water scarcity ever stops being an issue since the outputs those things will provide to other industries is unquantifiable.

[@AwesomeHairo]

Government restrictions*, not pandemic

[@tellmemoreplease9231]

"our total US assets is approaching $200 Trillion." The value of those assets could change tomorrow. The stock market massive bubble could collapse to near zero (theatrically), the real estate market could collapse 40-60 % or more. But the national debt WOULD REMAIN $32 Trillion, that has to be serviced.

[@supercommie]

I'm learning a lot from this channel. Thanks for posting.

[@kijake1]

Lately, I've been watching your videos and I've been wondering if you've read Doughnut Economy: Seven Ways to Think Like a 21st-Century Economist? This view of economics actually fits what I think economics should be.

[@YoungMule]

The debt issue has always confused me and I didn’t know enough about economics to articulate the question properly to find an answer. I didn’t get who we owed money to and why so many were nonchalant about such a staggering amount. This video has cleared up a lot of that thanks 🙏

[@robertagren9360]

They owe the people money but giving money for free is illegal without a complicated game.

[@pan2aja]

The Boomer created debt for the younger and younger generation to pay. Basically our children who have to pay their grandparents debt

[@PrimaMapleSyrup]

Boomers made it meaningless when they left the gold standard anyway

[@TFN_Coaxa]

One big problem here is, that we compare the debt to our assets, but these assets themselves are also linked to the debt. That means, that as showed in the video 68% of our assets value are real estates, but the reason why they can make such a massive part of the asset value is, because those prices are already pushed to the upside for decades by increasing debts. Especially the real estate area profits from our debt fueled system, because the interest on those loans are very low. As long as this system works its fine, but once it breaks the value of real estate will fall dramatically and with that decreasing the net value of our assets to a point where big debt IS a big problem. 2008 was a first sign for that. After that the 0% Interests were set up to keep real estate prices up. In my opinion something that cant work for that long, because at some point a new generation isnt able to afford any real estate on their own (or they have to take even bigger debt). This gets rather worse than better.

[@ReynoldAbbott]

This is straight to the point

[@jonathanabgrall6075]

"Governments hire economists to make sure their projects are financially viable", as a Canadian i genuinely laughed out loud.

[@zyler9462]

EE said they hire economists but not that they necessarily listen to them.

[@KRGruner]

@@zyler9462 It's better NOT to listen to them. Just sayin'...

[@montecorbit8280]

At 4:11 World assets.... I believe you were mistaken when you say the world assets is equal to 1 quadrillion US dollars. There was a TV episode in the US, something to the effect of "Selling America". The host at the episode totaled up yes that's the United States, and came up with a value considerably larger than that.... The Host, if my memory serves, with a guy by the name of Donald Trump....so it should be easy to go look up what the television episode was on IMDb or something. Still enjoy your videos, especially with the ones with the economic leader board....

[@Urbanfour]

Could you do a video on Real Estate and why it's often immune from the Supply and Demand law? Like how Landlords can sit on empty homes without dropping their prices despite their being more empty homes then there are people who can afford them (both in rent and in buying).

[@M3ganwillslay]

landlords need to pay taxes whether or not their assets are occupied . rents cannot be reduced just becoz bums cant afford it .

[@Urbanfour]

@@M3ganwillslay False. One of the reasons they will often sit on empty apartments or homes is because they can use the "lost revenue" as a tax write off. So they have little incentive to lower the price and get someone in there.

[@jeffmorgan4972]

You might be surprised how few housing units are sitting empty. Rents and selling prices do in fact fall because of owners avoiding units sitting empty. Happening in many cities right now as new supply (empty units) are entering the market.

[@omargoodman2999]

The simple answer is "Inelastic Demand". "Supply and Demand" isn't a be-all, end-all principle that functions the same in any given situation. There's _nuance_ to it and one of the influencing factors is "Inelastic Demand". For example, in a more _Classic_ setup, say Oranges, there's a certain Supply of Oranges and a certain Demand for Oranges. If you undercharge for Oranges, someone will come along, buy your underpriced Oranges, and flip them back onto the market for a profit. If you overcharge, no one will buy from you and your Oranges will spoil before you sell them. Now let's say something happens to the Supply; a bad harvest sharply reduces the available Oranges. Now, if you charge too little, you'll run out of supply too fast and miss out on potential profit you _could_ have made. By contrast, by raising prices, fewer people can afford the Oranges, but there are fewer to go around _anyway_ so that's fine. Those who *can* afford it and are willing to pay a premium for what is now a rare commodity will do so. Those who can't or won't will scale back and buy less. Thus, eventually the Supply is able to "bounce" back; it's _Elastic._ Same if there's a sudden _increase;_ people will buy more surplus at cheaper prices until the supply drops back down. And, on the flipside, if Demand shoots up with fixed supply, the price adjusts to either make the Supply last longer in the face of greater Demand, or get rid of surplus before it goes bad if Demand drops off. But let's look at something else. Not Oranges, but _Fire._ Your house is on Fire and you need it extinguished. Not only do _you_ need it extinguished, the whole *community* needs the Fire put out before it spreads and burns down _more_ homes. A Firetruck shows up at your home, and before they start hooking up their gear, they start pitching you a package for what level of "Combustion Deterrence and Removal" you'd be interested in, and the services available with each package... while your house is burning down. They *do* have some great deals, like a "Fire Sale" on _The Chemical + Hydro-Spray w/ Family Evacuation included,_ but they've kinda got you between a rock and a hot place. Not like you exactly have time and leeway to "shop around" for the best price here. This is an example of "Inelastic Demand", when people have limited reasonable capacity to adjust their demand in response to availability or price of goods/services. No matter how expensive it is, if the alternative is *dying* or *your home and all possessions burning down,* most people will pay whatever price is quoted. So things related to staying alive (ah, ah, ah, ah), health, safety, etc. are relatively Demand-Inelastic. And Housing is like that, at least to a certain extent. Couple that with a Landlord's ability to get a tax writeoff for lost revenue from unoccupied property to offset tax burden, and the fact that they base Rent prices, typically, to account for certain intervals of vacancies (your Rent pays for the tax for a few months _after_ you leave), and competent Landlords can sit on properties for quite a while to make sure they get a "good price".

[@childofaether8733]

The issue of real estate appreciation is that on a global level it creates no material value like said in this video, but on other scales (be it a person, a family or a company) it has infinite value because of the infinite rent income. There's even the feedback loop that real estate investment is even more valuable because that makes the asset itself always increase in value over time (despite short term crashes). This is largely why the first home purchase for primary residence is the number one priority investment, and it's also why mega corporations like Blackrock are buying more and more family homes for the infinite value they will provide (along with control of money supply going into their hands, since renters become dependent).

[@PrimaMapleSyrup]

Boomers are determined to make sure this ends in blood

[@mirzaahmed6589]

A lot of "good debt" is anything but. Most people with student loans are working jobs they could have done with just a GED, or even a middle school education.

[@matter7864]

Love the direction of the channel! Thank you!

[@austinpowersfasjer]

US debt accounts only for a small part of global debt? It accounts for like 25 percent of all debt according to these figures. Thats absurdly high

[@billyrobertson5213]

But we account for about 25% of total world gdp too

[@jaylewis9876]

This is the best channel on economics!

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[@robertgorin1002]

Opportunity is a scarce commodity. I will partake in this; there’s no limit to what you can achieve in life (including success) if you put your mind to it. Luckily I stumble into this.

[@riteshgupta4002]

I have doubts about how purchasing real estate is not productive for the global economy. It's not like we are buying land from Martians. It is simply a change in hands of money which the seller will either use for productive investment, consumption, or other real estate and so on. Not to mention that that real estate which is never traded also goes up in value paving the way for homeowners to be more comfortable in investing more and consuming more.

[@vincentfegley6068]

One question, it's possible for 2 entities to own each other's debt. Could two countries, businesses or people who hold each other's debt cancel equal amounts of the debt held from both sides? Is that a thing?

[@TheCrazyCapMaster]

They’d have to negotiate the terms but I don’t see any reason they couldn’t do it 😅

[@snakyjake9]

​@@ThomasVWormI think what he's saying is that me owing you $10 vs us both owing each other $5 is a very different situation, even if the total debt in both cases is $10.

[@snakyjake9]

@@ThomasVWorm the global economy can be very complex. It's valid to ask to what degree this type of debt exists without snarky remarks.

[@royce9018]

happens quite often, many countries keep other countries debt. China buys US bonds which is a debt.

[@DaveSmith-cp5kj]

No, because countries don't consider all their debt to be their responsibility. For example lets say a government agency A owes debt to you. If you try to go to government agency B to collect, they won't pay you. There is no direct organization of debt because the responsibility of settling the debt belongs to whoever initiated the debt, not necessarily which country they reside in. So you can have a situation where both countries owe the same amount of debt to each other but it never gets canceled out. However, this does not mean there isn't any loss of finance because in order to settle debts, countries print money which devalues the fiat. So now people who don't hold debt are essentially paying the debt of debt holders as their savings go down in value. This is why it is so hard to retire today while our grandparents could save literal pennies and be set for life.

[@davidallen8611]

This video is remarkably awesome

[@Mohammadalhajj55555]

I am honestly interested in this particular topic, and I am more interested in the 'interest' on the debt and how that affects the value of currency. It feels like there should be a more robust way of linking debt to the value of assets. Some organizations, like banks too big to fail, and governments too useful (politically) to let die, are insensitive to the laws of supply and demand.

[@itcamefromthedeep]

Interest rates are sometimes referred to as the price of money. The lender is exchanging current-money for an amount future-money, indexed by the perceived risk that they won't get it all back.

[@Mohammadalhajj55555]

@@itcamefromthedeep but doesn't that just mean that the expected future interest is money being created from thin air? I know this has been asked a lot, but i still don't get how this is sustainable with lenders expecting more money from the market than currently exists

[@tellmemoreplease9231]

@@Mohammadalhajj55555 Good one. Of course they "have" to create (borrow into existence) more money to pay back interest to the banks. Inflation is baked into the cake..... Now we are in a debt trap. They have to borrow even greater amounts to prevent the collapse.... Thank heaven we had the never ending wars, the great financial collapse and Covid crisis. What's the next excuse to borrow more money?

[@Lioin]

@@Mohammadalhajj55555 The expectation is that the production of value will grow as well

[@zhang73]

This is a great video. There is so much misconception about debt out there. The simple concept that modern monetary of debt based is something that a lot people don’t comprehend and refuse to do so. Without debt we don’t have any liquidity.

[@PrimaMapleSyrup]

Gfy leech!

[@kimyeonahchannel]

So if i'm getting this correctly, the global economy borrowing from the global economy future self is like someone borrowing a "good time" from their future self by going to a bar and getting wasted, but their future self have to repay that good time by dealing with the terrible hangover tomorrow morning, as opposed to just having a boring friday night and a normal tomorrow morning

[@jacobjones630]

All debt is essentially a gamble on the future.

[@nINJAP3RUNA]

I guess in this analogy you are borrowing from your future self every time you spend time on anything. Spending time working or exercising could be seen as spending the borrowed time in a productice manner, and spending the time watching TV or drinking could be seen as spending it unproductively. In the end you have to deal with the consequences of what you have spend this borrowed time on.

[@vivienneduong6541]

More like not using protection and ends up paying child support.

[@dawidwtorek]

Better analogy would that of staying late. You could stay late by going to a bar, getting wasted or you could stay late learning yourself a new skill. In both examples you borrowed energy from the following day but in the second example you invested that energy to become more productive.

[@Unknown-jt1jo]

Nope. A lot of the borrowing is for the sake of economic development, which benefits future generations.

[@raybarry4307]

This was a very ideal version of how the global economy Should (I stress Should) work in an ideal world. It doesn't even slightly take into account political realities.

[@tryep5567]

So, what I've learned from EE is that national debt doesn't matter and we can basically go infinitely into debt as long as asset prices artificially inflate too. But maybe I'm wrong

[@TheChrisaige]

Thats the conclusion you reach when you read into MMT aswell. National debt can be a problem, but not like most people think, its only when said debt does not output new wealth, that debt becomes problematic. Thats why my small nation (Austria) has spend close to 5 billion euro for a new traintunnel that goes from carinthia to styria, but this debt actually never has tobe repaid, because its actually backed by a asset that will provide enormous value for the country for atleast 60-80 years to come This is what people have to realise about money/debt. The issue of national debt is not the debt itself, but the wealth created by it. If you live in the US and see most national debt just being sifoned into car infrastructure and single family housing, then I understand why you are concerned, because these things are inherently shortterm economicly decitions made on a national scale. Suburbs and car infrastructre are financially unsustainable and only create wealth for a small portion of the population, not to mention the externalities like land and resource use that also hurt the economy at large

[@Gustav_der_III]

What really limits our economy are real resources (labour, stuff). Money/debt is just a social construct, invented by us. So money should be used in a way to put the real resources as efficient as possible in place.

[@wsxgfhccr]

Money printer goes BRRR and welcome to the great Ponzi scheme called the modern economy!

[@detocquevi11e]

@@TheChrisaige "If you live in the US and see most national debt just being siphoned into car infrastructure and single family housing" .....or even worse, if you see an accelerating portion of the debt consisting of just servicing the debt.

[@chongjunxiang3002]

The reason you are accumulate debt is due to someone willing to trust you to pay the debt with extras. As long as you are able to pay debt on time, theoretically you can borrow infinite money if you can have infinite productivity, thus produce infinite surplus, and the debtors are happy you can pay infinite interest as well. That is how debt economy in national level should work.

[@friedux2065]

Stock buy backs are financial manipulation not investments. R&D is the proper example.

[@TerryVogelaar]

To me, there is an apparent blind spot in this narrative, being that debt creates a power imbalance. Those who have can lend to those who don't. In other words: when debt increases, the power of the rich increases while the poor become less powerful. Growing debt means growing inequality. Hopefully, this will be addressed in the next video.

[@Obsidian-Nebula]

Inequality is natural. Everyone will not have the same amount of money

[@TerryVogelaar]

@@Obsidian-Nebula True, I don't propose everyone should have the same income. However, the differences have already become too big, and we should work towards decreasing the difference. We should live in a meritocracy, meaning whoever contributes the most earns the most. But we don't. Instead, those who already have a lot of money are likely to get even more, while the poor, who actually add value instead of just money, do that for the lowest salary. Yes, inequality is natural, but that doesn't mean we should increase it.

[@ObstaclestoOpportunities]

not if the poor utilizes the debt of productivity

[@TerryVogelaar]

@@ObstaclestoOpportunities I understand your point, but there are problems with that. The poor usually are considered less likely to pay their debt, so the interest percentages are much higher for them, to compensate for the risk taken. If they utilize their debt to become productive and generate an income for themselves, they still did so by working hard, while the only thing the lenders did, is "take a risk". Additionally, cocoa and coffee are often harvested in the poorest countries, but the processing is done in the West. Making chocolate and roasting coffee-beans are patented processes. And those add the most value to the product. So, while the farming part is irreplaceable, most money is made somewhere else. Wealth always generates more wealth, and being poor is very expensive. In other words, money always flows to the top.

[@-IE_it_yourself]

there is no money. there is only the FOSSIL FUEL CREDIT CARD, that we have been borrowing off of. and we will have to pay it back soon. We have borrowed a huge amount of energy from a closed system. we were never RICH we simply borrowed it. and yes there will be interest fees.

[@FrancesRyan-b2p]

It is good we acquire as much wealth as we can, most people fail to understand what it takes to become wealthy, they want to become wealthy overnight by thinking their savings will help them attain that, they fail to understand that investment is what truly builds wealth. I advise you all key into investing and earn side money than depending on your savings if you truly want to be wealthy

[@KadreYilmaz]

The thought of retirement has given me the opportunity to sort out another source of earning

[@KadreYilmaz]

I started paying more attention to stock and learning more about online trades

[@JewellOguin]

Meeting with someone genuinely good at the financial market was a break through for me

[@BenState]

This is not about personal wealth though. But any chance to make your sales-pitch i guess.

[@akfdglkjadfgjl]

Shocked by the amount of oil you put on that pasta

[@NLuck-eh5cd]

Debt is a good idea, to an extent. Debt is basically non-productive capital being converted to productive capital - the factory owner produces X goods for Y return, but only spends half of Y. The other half can either sit in a vault as non-productive cash, or be issued as debt and make a percentage return each year - so generally issuing it as debt is better. Meanwhile, another factory scaling up can access this excess capital to scale up their own business, meaning both halves of Y are generating economic output, while before only one half of Y would, while the other half sits in a bank vault doing nothing. This is the capitalist approach, the other way to ensure both halves of Y are being used productively is a soviet-style centralized command economy, which has had a pretty bad track record since markets are generally far too complex to plan centrally and still match the output of a more free market. So debt only becomes a problem when the invested half of Y isn't invested into productive assets - this is EE's point about real estate. Treating non-productive but necessary assets like real estate and food as investment assets is terrible for the global economy because it grows the expected repayment rate in the economy (as a percentage of the loan), which drags other consumption down, without actually adding any production into the economy.

[@antonyjh1234]

Debt is a great idea for those that create it because it costs them so little, the debt you are talking about is basically other people's debt that a commercial bank lends out, so it's always being productive for them, multiple times. Debt as you say is a good idea when a factory owner can produce something people are prepared to pay for, the issue is a declining population in the modern world. The doubling of the worlds population was great for debt, the next 30 years and we'll see 50% of that and if you are in a monetary system where there are going to be 50% less customers then debt get's more difficult to pay back, now imagine a country like Japan, that is supposed to lose 50 million people, or any of the 23 countries that are going to lose 50% of their population by 2100, debt becomes riskier and riskier the more time goes on.

[@DaveSmith-cp5kj]

Debt is never a good idea. It is a gamble but no one wants to call it out as such, because then we would also have to recognize the fact that our fiat is fake money designed to hide the debt.

[@Aleamanic]

Great explanations. But I am missing the mentioning of inequity. While talking about averages that look net positive, the video skipped the rising imbalance in equity (how wealth and ROI is distributed), and how that might have consequences in the future

[@sirtic6880]

another good measure of an economy is PPP or Purchasing Power Parity which isn't converted into dollars like GDP and basically looks at what a person pays for a basket of good in any given country which I think it a more practical measurement for the average person.

[@Foxtrotopia]

PPP has a lot of drawbacks and can really only be used to compare two economies against each other, and it falls apart in a lot of situations. For example if cola costs me $1 and you $2, then I would have a higher PPP because I could buy 50 colas and you could only buy 25 if we both had $50. However, if you make 3x more than I do, then in reality you could buy more cola than me. Or if we make the same amount of money and pay the same amount for Cola, then we would have the same PPP. But what if you also pay 50% in taxes and have high rent prices. Then we have the same PPP, but I can buy way more cola

[@jimmcneal5292]

​@@Foxtrotopia ppp is inaccurate not because of that

[@gravy7103]

No sources linked in the description??? I know it says where it’s taken from but that isn’t enough information for me

[@AlanMitchellAustralia]

The whole concept of summing debt without deducting assets is pretty useless. I could take out a $1bn loan, place the funds in an offset account, and pay no interest indefinitely. I've added $1bn to world debt, but my net assets remain unchanged. Debt, as a single metric ignoring assets, is simply a measure of financial transaction volume. The more 'debt' in an economy, the more movement of funds taking place. It says absolutely nothing about net wealth and financial stability.

[@stephenhowes6509]

I think why everyone is hyper focused on Debt to GDP (income) is because it's easier to measure. Measuring total assets of a country is next to impossible.

[@thatguychris5654]

Just like beauty....value is in the eye of the beholder.

[@juanmartin1729]

The only reason why the usa manages to avoid a debt crisis is due to their possession of American military bases across the world and control over the Swift system. Without these elements, they would likely suffer from high inflation, currency devaluation, and economic turmoil, similar to what countries like Turkey, Pakistan, and Egypt have experienced.

[@royce9018]

lol

[@tellmemoreplease9231]

Also, The Petrol dollar..... That is why we must control the worlds oil. Oil producing nations must sell their oil for dollars. Artificial demand for the dollar keeps the value up. Big one.

[@faisalabdelkarim6457]

Mostly because the US is able to print unlimited dollars. If the dollar is only in the US the inflation will be like Zimbabwe, but the US exports the inflation everywhere the dollar is used. Wait until the world drops the dollar.

[@ObstaclestoOpportunities]

@@tellmemoreplease9231 not artificial it is power in the world. Anyone can create Artificial X,Y & Z but not everyone can create power, military base in another name is not Artificial it is real

[@DonaldCicc]

Excellent video as usual. A few things to add. There are debts that are not included in this video. Responsibilities such as pensions, social security, medicare and other obligations. According to one economist who calculated the total US debt taking these into consideration the US debt alone is $220 trillion. However some of these obligations are fully funded, as do some states have their pension plans, others like California have a shortfall of $1.4 trillion, and social security is going to run out of those treasury bills in the next few years and only be able to make 79 percent of their obligations once that happens. I would love to see Economics Explained delve into this issue and how demographics might impact this debt load Thank you!

[@dead-claudia]

strictly speaking, those aren't debts, but promises. - social security functions more like insurance, in that everyone pays in, and the gov has the final say on who is and isn't allowed to receive payouts. debt can in theory be taken out against this, but it's rare and both economically and politically risky. - medicare is literally just insurance. only difference from public insurance is it's tax-funded. likewise, the gov can (and commonly does) deny payouts almost arbitrarily. - pensions come in two flavors: glorified long-term savings accounts and social security-like payout systems. the first is obviously not debt (the only guarantee is the account balance), and for the second, see the first point.

[@DonaldCicc]

I agree these are not debts but responsibilities or as you said promises. But they are expected to be honored. And as I said they range from fully funded, to partially funded, to no funding. "pensions come in two flavors: glorified long-term savings accounts and social security-like payout systems. the first is obviously not debt (the only guarantee is the account balance), and for the second, see the first point." If the savings accounts are underfunded and cannot meet their obligations that is certainly debt. Social Security has already been increasing the actual debt. As the T Bills the SS Department has been cashing in to pay recipients the Fed has had to pay those, by borrowing. Once they run out of those in three to five years the system will only take in enough tax revenue to pay 79 percent. Medicare is health insurance, also funded by taxes, and will start running a deficit soon, which is projected to continue growing. And pensions, such as the California one, well states can declare bankruptcy and then pension holders might only receive pennies on the dollar (see the city of Stockton going down this path). That is going to have large effects in the California economy.

[@Thecreatorshaq]

Another great informative video.

[@Termless]

bro you posted this comment 2 mins after the vid was published...

[@GvDoe]

@@Termlessthey’re from the future? 🤷🏾‍♂️

[@alpha7158]

This is one of your best videos imo

[@duuplo]

0:15 You mean the US is "the largest economy", not "the largest nation"

[@SryYouFail]

The clips of people in science coats pointing at random graphs really helped me understand. Thanks

[@snowballeffect7812]

We need a debt jubilee like we used to have. Just clear the books and reset like at the end of Fight Club. The debt holders are already fabulously wealthy; they can stop leaching off the poor for a bit.

[@michaelcheers8803]

12:20 50% more does not equal 50% less in the inverse, that is 30% less

[@TheNaturalLawInstitute]

Congrats. This was one of the most normie-friendly bits of necessary education Thanks for all you do at EE.

[@aroto]

This was actually a very helpful video and put things in prospective

[@djayjp]

EE, could you do a video series on Environmental Economics? The value of natural assets in dollars. How this compares to earnings generated vs exploiting those resources and their lost value. The subsidies to fossil fuels vs the money spent to reduce carbon emissions. I'm interested in exploring the perverse tendency of humanity to be self-destructive in totally irrational ways.

[@ObstaclestoOpportunities]

yes we can all live off the trees

[@hauke2996]

Actually there will be no plus money if there is no dept or?

[@MatsueMusic]

It’s strange that the system is designed in such a way that once money flows to the common person that interest rates go up and markets crash. Not advocating for handing out high risk loans without due diligence but the fact that the same few people have the opportunity to capitalize before the market crashes, is suspicious.

[@anonymousanonymous6424]

Great observation.

[@ObstaclestoOpportunities]

not true most rich folks are first made, so all people have the opportunity

[@JesusAlfonso-k9f]

is called speculation in a global scale

[@ShamileII]

Documentary level quality video! Keep up the great work!

[@blinking_dodo]

Question: what would be the positive sides of a nation without debt? And would such a situation be possible or favorable in the real world? (Including what the effects of deflation would be on such a nation?)

[@SmileyEmoji42]

A nation, voluntarily without debt, is a nation that can't think of any productive way to spend any borrowed money and, if it is a democracy, its citizens are not demanding that it spend any more on anything. In the real world citizens always demand that their governments spend more so a debt free nation would probably have to be a dictatorship (for brief periods of time it can be just about possible for small, resource rich countries such as Norway but it cannot be sustained when the resources run out and the change of circumstances might well be more painful than just having debt as humans are very ubforgiving when things get worse)

[@weird-guy]

They will be poor imo, how can anyone start a business if they don’t got any money to begin, how they got customers if customers have no money in their wallet. Imo debt is necessary but at least in the personal debt a lot of people shot themselves on the foot , but that money still end in the corporation pockets and after in their employees pockets. Is to complex for my dumb brain, although imo debt is necessary it still creates a lot of inefficiencies like corruption, bad used funds ect

[@BilalAhmad-ff3xq]

Just ask the soviets.

[@Kriss_L]

A lack of, or minimal, national debt would be very good. Very limited government spending would allow for very limited taxes, so that people could keep the money they earn and be able to participate in the economy. And it would also be a great incentive for businesses to be able to operate without having to pass on the additional cost of taxes for its goods or services.

[@blinking_dodo]

@@weird-guy "They will be poor"... If you have enough money to pay off your debts, you certainly are not poor. But i wonder about the economical implications. Especially since having money instead of debt would make deflation beneficiary to you.

[@adsharma916]

Nice work!

[@steadyrow]

the only way you escape national debt is by printing money, printing money devalues the currency completely screwing over currency holders.

[@CaillouThePimp]

Not true. The government can also just spend less, although that would also have wide ranging negative consequences.

[@jacobjones630]

You can also just make more nice stuff for the currency to represent. Mass mobilization of the work force to make useful things instead of investing in a tunnel under las vegas that fits one car at a time

[@enderreaper1482]

That's what post WW1 Germany did, thus hyperinflation.

[@theconqueringram5295]

This is interesting and I look forward to part two.

[@olgajoachimosmundsen4647]

I still find it interesting that the USA stands for 25 % of the global debt, consisting of roughly 4 % of the world population. To me the US economy seems to be at some level a credit-card economy, where you always live above your means and trust that tomorrow will cover the bills in the end.

[@CaillouThePimp]

That’s the privilege you get when your currency is the world reserve.

[@lordbertox4056]

If at least it was spent on infrastructure or education instead of the army...but we all know how that is in the USA.

[@glint6070]

​@@lordbertox4056 There are geo-political ramifications to that. The U.S doesn't have the luxury of drastically re-aligning it's military structure without global consequences. What would be ideal is fixing the wasted spending already going into infrastructure right now (for example, suburbia is hugely inefficient)

[@zesky6654]

The US is also vastly more wealthy than any other country.

[@understanding.everything]

​@@zesky6654measured in USD ponzi 😂😂😂

[@iceman850none5]

Do we still have people effectively taking bets on wether people are going to pay back debts? Like the CBOs that crashed the US housing market in 2008? If so, are those also being factored into the debt number?

[@St0neByte]

This guy talks like the coffee shop girl from loudermilk 😅

[@TimeIsMine93]

Not enough people will get this

[@mt7able]

Two different points of view about the future and the global economy: 1. Everything is fine 2. Everything is not fine As usual, the truth is somewhere in between.

[@Leo-ok3uj]

The truth is “is”

[@1996tre]

Curious to know if the world decides to stop using USD what would happen to the debt.

[@bayumorita3782]

Reducing debts mean increasing debts for long terms..... War and inflation are the best tools to reducing debts but at the same times it's always increasing debts too.... Mankind never enough for debts....

[@GarageSupra]

Random thing I read once, If you have $1000 to your name but are debt free, you are in the top 10% of richest people in the world

[@brexistentialism7628]

Greatly explained even though it's very general and top-level.

[@tiagoquental1029]

It's easy to control unproductive debt, let the commercial banks go bankrupt and don't rescue imprundent investors when they don't manage their risk. If the SVB wouldn't been bailed out, we would be now looking at low inflation, stocks at reasonable prices and so real state. As long as everyone is saved at the end, nobody cares about risks, only greediness.

[@jimmcneal5292]

Yeah, and then economy collapses because of bank run

[@DaveSmith-cp5kj]

@@jimmcneal5292 All economic collapses have been because of government intervention in banking, not the lack of it. The Great Depression for example was caused by the Federal Reserve encouraging banks to accept risky loans such as to low income individuals who lacked the capital to cover the debt. This is what lead to the default of loans. SVB for example invested a huge amount of money into environmental "green" startups that had no grounding in reality, but they knew the politicians who would vote to bail them out wanted these investments to be made. It's a scam.

[@davidav3980]

i just found this video in your list. This is an awesome video !!! very informative and very well explained.

[@dannywalters2365]

We should pretend we owe it to the aliens and default

[@delfimoliveira8883]

The scale of hidden dollar debt around the world is huge. No less than $65 trillion in unrecorded dollar debt circulates across the global financial system in non-U.S. banks and shadow banks. To put in perspective, global GDP sits at $104 trillion in debt

[@StandingWhere]

We don't owe this debt to ourselves. Very few people have investments in world debt. The people who do are the 1%. The owners of the world debt are the 1% who will get richer by it

[@pupstime]

Hi, amateur economist here, I think total asset to total GDP is not a good proxy for productivity. Rich people buy luxury home, yacht, luxury car, or collectibles like art, or gold, all of which are not productive asset (or at least not as productive as conventional productive asset), but it doesn't mean rich people are not productive. Of course I understand it just an approximation, but I think total debt to NNI (Net national income) are better approximation for productivity. It directly measure an entity ability to translate those debt into income growth. If an entity can use those debt to increase the income more than the interest increase on the debt, that means those additional debt worth it right?

[@catabol]

I am curious how would a world with 100% gold-backed currency would be like.

[@arne1021]

horrible, because of Deflation en.wikipedia.org/wiki/Deflation

[@BryantAvant]

That can’t happen because then the elites wouldn’t be able to hoard money that the government prints for them.

[@caseyhoward9101]

Miserable. The gold standard is the biggest scam in human history.

[@Rochi47]

I know you already did a video about South Africa, but considering the current crisis in the nation, I think you should make a remastered version.

[@stevenrafa1]

The only reason why the usa is not facing a crisis is because they have US military bases established worldwide and maintain control over the Swift system. otherwise, they would likely experience significant inflation, currency devaluation, and an economic downturn worse than turkéy, lîbanon

[@strikemike7811]

EE, I have a question. In the 95%, 5% percent of ownership of assets, shouldn’t foundations also be in there? I think technically they own assets, and nobody owns a foundation, right? Although, it might be a negligent percentage on the global level.

[@decreasing_entropy3003]

This is what I always wanted schools to teach, but we all know what they actually do.😂

[@jasonnugent963]

You don’t think schools teach ?… How does society have so many people that can communicate and Read and navigate daily life if not for the foundational knowledge that basic schooling provides ..?

[@decreasing_entropy3003]

@@jasonnugent963 Dude, whatever I have learnt is mostly not attributable to school. I have had to do a lot of digging myself, which I have no complaints about. What I am despondent about is that teachers claim that they tell you everything that you need to know, which hasn't been the case for me, and for a lot of people I know.

[@aittit]

​@decreasing_entropy3003 I've never encountered a teacher claiming that they teach you everything about that particular sphere. They just give you the basic foundations starting from basic school to even in undergrad level, they don't teach you everything about that subject, they just teach you the basic principles, even a lifetime is not enough to teach everything about the subject, though it is not needed to know everything to succeed in your career, you just need know the most crucial parts.

[@decreasing_entropy3003]

@@aittit I completely agree with you, but most teachers who I have encountered have been difficult to deal with. What you are talking about is the ideal case, which if I become a teacher, I would strive to live up to because I have seen teachers who are guilty of dereliction to duty, and who I will never emulate.

[@aittit]

@decreasing_entropy3003 This is a really unfortunate experience. I hope you can make it!

[@dereklush9399]

Your best video in a while

[@curleonsquad9662]

bro stop ending your sentences that weird

[@bigheadcreative6631]

Please

[@dadthelad]

Can't wait for next week's video!

[@jimrobinson4786]

A financial guru in the US says "never borrow money to buy a liability, borrow only to buy assets ". Could this idea work for Government budgets? Our politicians have run deficits over and over. If the deficit spending was only for investments ( like roads ) would this work and what effect would it have? The guru is Dave Ramsey.

[@ObstaclestoOpportunities]

people cry out for social programs so you would have to ignore massive amounts of folks requesting capital and deleting all government agencies

[@gabrieldta]

I would loooooove to see next: "How is debt distributed among population? My guess is that the top 1% loaners account for some 90% of the debt; much like income inequality. Total guess, tho.